Tag Archives: monopolies

I wish to lay out some hypothetical arguments to consider before identifying my point in making them—please don’t jump ahead.

Let’s imagine that Walmart, K-Mart, Kohl’s, et al. decided they weren’t making enough profit. The companies met and agreed to hike their prices by 10% across the board to address the issue. If they unite together, they can all raise their prices equally, make more money, and the consumer is left no choice but to pay the increased costs. It’s a genius idea for the stores of course, but there is one problem. There’s a name for such shenanigans—it’s called collusion. It is highly illegal because it violates the competitive principle of free-market capitalism.

In the world of contract law, in order for a contract to be valid, it must have a quid pro quo. Meaning that if I write a contract that simply said I’d give you a million dollars with nothing in the contract I get in return, that contract is unenforceable—a contract must be beneficial to both parties. Why? Because there’s no logical reason for a person to sign a contract where only the other party benefits. It either implies something illegal that is unwritten, or someone who is mentally disadvantaged in such a way that they cannot fully understand what they are agreeing to.

Standard Oil Common Stock

In the 1800’s, as Standard Oil rose to be arguably the most powerful company the world has ever seen, they kept buying up all the smaller oil companies who dared compete with them, making it so no one could get oil unless they got it from Standard. As a result, Standard could charge whatever they wanted, they could treat employees like dirt, and they didn’t have to concern themselves with the quality of their product. Why? Because there was no competition for consumers or employees to force Standard to be better. This is called a monopoly, and is also highly illegal—now. Mostly because of Standard Oil.

If I owned an automotive chassis manufacturing business but needed to find an engine builder to help me produce a car I want to bring to market, I would meet with several and begin to work on deciding who best suits my needs. After picking a few who show promise, I’d choose the one I liked best from the group and enter into contract negotiations with them. If none of them were to my liking, no contract would be agreed upon. I’d be back to square one and they’d be out of a job, but at least neither of us entered into an agreement we didn’t want—that’s how contract negotiations work. But more importantly, the option for both parties to walk away is the one and only thing that ensures contract negotiations are fair and mutually beneficial.

John Gotti – Famous Racketeer

In an illegal tactic known as a protection racket, if I were to say, “You pay me to protect your business or else…” you would either do it, or you risk me destroying your business’ property or physically attacking you. It’s a tactic made famous by organized crime. Such a contract would be a contract signed under duress, also highly illegal and unenforceable. It is similar to the quid pro quo issue, but the people doing the threatening present the act of not harming you as the thing they are giving you in return.

So now that we’ve covered these tactics, why do I mention all of them? Because labor unions violate each one.

How is this possible?

Government officials over time, courting the unions and the powers they possess to help them get elected, have carved out laws to allow these otherwise illegal practices to be employed by unions. In doing so, it gives the impression they are helping the populace, even though the large majority of Americans are actually non-union.

There was a quid pro quo here, but it wasn’t between the unions and the employers who have a contract with each other, it was between the unions and the politicians. The people and the employers merely got the shaft.

So how do they violate these rules?

Collusion, protection racket, and contracts signed under duress: Union employees unite together to force employers to pay them more instead of competing with each other in a free employment market. They don’t ask for a raise on their individual merits, they demand them as a collective “or else.”

No quid pro quo: They force companies to sign contracts that are beneficial to the union at the detriment of the employer. They insinuate that their quid pro quo is that they provide a good work force to the employer, but if you asked any employer if they wanted a union versus a non-union workforce off the record, I defy you to find employers who would prefer union-workers. Let there be no doubt that if any unionized business was given the option to get out of a union contract and peacefully hire a new non-union workforce, they’d do it without hesitation. The idea that unions provide a service to the employer is a myth perpetuated by unions to overcome the fact that there is not a proper quid pro quo in their contracts. There is no logical argument one can make whereby a contract between an employer and a labor union is mutually beneficial.

Monopoly: No business or employee gets to choose between which union it deals with, nor are there multiple unions competing with each other in an industry. The applicable union a business is compelled to do business with merely dictate they are the ones to be dealt with whether you like it or not. In non-right to work states, they don’t even have a choice as to whether or not to participate as a condition of employment.

Contracts signed under duress: A business owner has no option to just walk away. This is called union-busting, and there are actually laws to prevent it, which effectively strong-arm business into making a deal by legislative force, also a form of duress. Union workers don’t just threaten to quit and find employment elsewhere if their demands aren’t met, they stand outside your business and prevent, deter, and/or interfere with customers and other workers from going in and doing business there. It’s not a Let’s-Do-Business-Together contract, it’s a Do-Business-With-Us-Or-Else contact.

The list of companies that were made healthier and more profitable by the addition of a unionized work force is so minimal as to be non-existent. Much like socialism, it’s sold as a system designed to serve the greater good, but also much like socialism, I have yet to see an effective example where the greater good has truly been served. Until labor unions are forced to operate under the same rules as everyone else, they continue to be illegal enterprises only made legal by selective legislation—our economy will suffer until American’s elect honorable politicians who care more about the moral high ground than election results and put an end to this.

Most people know that monopolies are illegal, but not everyone understands the history of antitrust and collusion laws or why they exist at all.

As a libertarian, I basically support free market capitalism and laissez-faire, but why do we libertarians and other liberty minded people support this? Because free people who run free enterprise are free to innovate and this innovation brings us a superior product. Competition among innovators also drives down the price as they seek to gain market-share. It’s why you can get a miracle of modern technology like the iPhone or Droid for a mere pittance—with a 2-year contract anyway.

U.S. Steel – Youngstown Ohio

But if we look at the history of monopolies here in America, Standard Oil and U.S. Steel were the most popular in our history, and what transpired was not good. Thus making the case for some semblance of government oversight.

I am often berated by anarchist-like libertarians for championing even the most minor government regulations in our marketplace, ensuring they compete and that they don’t violate our rights, but these people are ignoring historical evidence to promote an ideal I agree with, yet know doesn’t work if left unchecked. History has already proven it. Just because none of us were alive during that era, doesn’t mean we don’t have the documentation to know what happened when we had market-anarchy.

Standard Oil Common Stock

Prior to antitrust and collusion regulations, the quality of goods from these trusts was poor, the working conditions were so atrocious that workplace deaths and injuries were quite common, and the cost of what came off the production lines wasn’t cheap. Why would it be? If you’re the only game in town, providing a quality product, safe work environment, and competitive pricing and wages, simply aren’t needed. Just as absolute power in government corrupts, absolute power in business corrupts too. The moment a business owner needn’t fear people buying from his/her competitor because no competitor exists, corruption can, and likely will, be born.

Anarchists argue that if workers don’t like it, they can go work somewhere else. But where do you propose people go work? The very definition of a monopoly is that it’s the only business in an industry. Thus, there is nowhere else to work. If an enterprising person attempts to go into business for themselves, they’re either forced to sell to the monopoly, or crushed by it if they don’t. These are not wild conspiracy theories I’m floating, it’s historically documented evidence.

The design of free-market capitalism, is not dissimilar to socialism or anarchy. In a perfect world, they would work as intended and yield the desired positive result. History has proven however, that they also have the same flaw. There will always be sociopaths among us who don’t have the power of empathy or value the benefits of being societal. The only decent way mankind has ever dealt with these people is via rule of law. Such people have no qualms about taking advantage of others and doing them harm for personal gain. Our Constitution is designed to prevent these people from corrupting our government, and competition should prevent them from corrupting our markets. So ensuring competition is vital to our society, our rights, and our economy.

Andrew Carnegie, Cornelius Vanderbilt, John D Rockefeller

John D. Rockefeller, J.P. Morgan, and Andrew Carnegie proved that there’s a point at which if you do something right, you can control an industry to such an extent that no one else can compete. These men were likely decent people who considered themselves altruistic and good, but the unfettered power they eventually wielded corrupted them in such a way that they became consumed with winning and had little issue engaging in immoral practices to accomplish this goal.

So aside from protecting our rights to life, liberty, and property, in my opinion, government should justly be ensuring our markets stay competitive and uncorrupted.

So now that we understand, and hopefully agree with regulations preventing monopolies, I’d like to point something out:

Government is a monopoly!

The federal government competes with no one. State and local governments may seem to compete with each other, but if you live in Ohio and don’t like the service the Ohio government provides you, you can’t choose to do business with the Virginia government unless you move to Virginia. It’s quasi-competition at best where states compete to lure residents and businesses, but it’s certainly nothing like Apple versus Microsoft or Ford versus Chevrolet.

So when people like me beg and plead voters to elect more libertarian-like officials, it’s because we know that they’re the only politicians who intend to rebuke and regulate away power bestowed to their predecessors once they inherit it. In doing so, lowering the possibility of corruption, because the smaller government is, the less opportunity for corruption to occur. In the face of the IRS, Benghazi, and press scandals committed against the AP and Fox News, I sincerely hope you understand why we libertarians have been right all along, and are starting to feel vindicated for making these arguments so many seem to laugh away not long ago.

Do you remember Barack Obama making this commencement address speech at my beloved Ohio State University about a month ago?

The irony of this speech that occurred as all three conspiracies started to break into the mainstream media is chilling. It is exactly why we must only trust a politician who tells us not to trust him/her, not to grant them authority, and not to give up your freedom to their ideas of how we should be ruled.

“Experience has shown, that even under the best forms of government those entrusted with power have, in time, and by slow operations, perverted it into tyranny.”
― Thomas Jefferson

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log·i·cal: capable of reasoning or of using reason in an orderly cogent fashion lib·er·tar·i·an: an advocate of the doctrine of free will; a person who upholds the principles of individual liberty especially of thought and action